US judge preliminarily approves $38 billion Visa-Mastercard swipe fee settlement

A US district judge has preliminarily approved a $38 billion settlement between Visa, Mastercard, and a class of merchants regarding excessive swipe fees. This agreement marks a significant development in a legal dispute that has persisted for over 20 years, following the rejection of a previous $30 billion settlement two years ago. Under the proposed terms, the networks will reduce interchange fees by 0.1 percentage points for five years and cap standard consumer card fees at 1.25% for eight years.

The class-action lawsuit was filed in 2005 by more than 12 million merchants accusing the networks of charging excessive processing fees. In 2025, credit card networks charged merchants approximately $119 billion in swipe fees. In 2024, the average processing fee paid by merchants was 2.35%. Merchants typically absorb these costs or pass them on to consumers via surcharges of 3% to 4%, or by offering cash discounts.

One of the most significant changes under the settlement is the discontinuation of the "honor all cards" provision, which currently mandates that merchants accept all Visa and Mastercard products. This change potentially allows merchants to decline higher-cost rewards cards or impose surcharges on them. However, major retailers have indicated they are unlikely to reject premium cards due to customer demand.

The National Retail Federation (NRF) has expressed disappointment with the preliminary approval, arguing the settlement provides no meaningful relief and preserves the existing fee structure. In a statement, the organisation noted that the proposal leaves intact the underlying system that enables Visa and Mastercard to dictate the rules and costs that merchants and consumers must bear. The NRF stated it looks forward to participating in the next phase of the proceedings.

It remains uncertain whether the reduced fees will be passed on to consumers in the form of lower prices. The long-term impact on the availability and popularity of rewards cards is also unclear, although major retailers have indicated they are unlikely to reject premium cards due to customer demand. Final approval from the court is still required to formalise the agreement.